How To Protect Your Child’s Inheritance From A Divorce
As a parent and grandparent, you want to make sure your children, grandchildren, and their descendants receive the inheritance they are due, based on your wishes. In many cases, this is as simple as willing your assets to them – but a will may not protect your children and grandchildren from losing a large portion of their inheritance in a divorce.
Thankfully, there are ways to plan an estate to provide maximum protection for your descendants in the case of divorce. While we always recommend you retain an experienced Chicago family law attorney, there are a few fundamental actions you can take to help protect the people you love.
Divorce and Inheritance: Two Scenarios
There are two basic scenarios where your children’s inheritance may be at risk:
Children from a prior marriage: In many cases, parents have children with an earlier spouse. If you were to pass away without having a proper will, a portion of your assets may pass to your current spouse rather than your children, resulting in an unintended distribution of your assets.
Your adult child’s divorce: If you are not careful as to how you pass your inheritance down to your children, they are at risk of having large portions lost during a divorce. Not only does this leave your child without the assets you wanted them to have, but it also means less will go to your grandchildren and other descendants.
The Importance of a Will
A will is one of the most critical documents in estate planning. You are legally entitled to dictate the distribution of your estate as far as:
- Any premarital assets
- Any inheritance you received from your parents
- Your share of any marital property
Drafting a proper will can protect your non-marital children, marital children, grandchildren, and any other descendants you wish to pass your wealth and assets to upon your death. Working with a family law attorney can ensure you have the proper verbiage to avoid any contest, leaving no question that all of your children receive what you intend.
Protecting Your Adult Child
If you fear that your adult child is at risk of divorce or may become so, it is prudent to place their inheritance in a trust instead of having it pass directly to them.
Legally speaking, an inheritance is not considered a marital asset in a divorce – but the situation can become muddied and contested when inheritance funds are combined with the marital assets in any way. For example:
- Your adult child deposits an inheritance check into a joint bank account
- Your adult child uses the inheritance to purchase or invest in joint property
A trust avoids these and other possibilities, as it allows you to place the assets entirely in your child’s name and dictate the ways it can be used. Furthermore, you have the option of using a trustee who can help oversee and make sure that the intentions of the trust are not violated.
The Importance of Estate Planning
Estate planning is critical for families with significant assets and isn’t something about which you should procrastinate. By taking the proper steps and having a clear, well-drafted will and trusts for your children established correctly, you protect future generations should the unexpected occur.
Our team at Nottage and Ward, LLP, has decades of experience with complex estate and succession planning, income structuring, and compensation plans for families with significant assets. We know the laws involved, and we know how to protect you and your family from losses due to divorce. If you have any questions or would like more information on the process, call us today at (312) 332-2915 to schedule a consultation.
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